Neiman Marcus goes bankrupt, idled by virus and crushed by debt
Neiman Marcus Group Inc. filed for bankruptcy after efforts to manage its crushing debt load unraveled amid the spreading coronavirus pandemic.
The Chapter 11 filing in Texas gives the Dallas-based luxury retailer a break on its debts by letting it stay in business while management works out a recovery plan. Any turnaround will be complicated by the fact that its stores were shut and its workers furloughed to help stop the spread of the Covid-19 outbreak. Most of its workers were sent home in April.
Neiman Marcus manages more than 40 namesake stores across the U.S., two Bergdorf Goodman stores in Manhattan, two dozen Last Call locations and a Mytheresa in Germany. The latter is a brick-and-mortar version of its fast-growing Mytheresa online merchant.
Most of the company’s department store rivals also suspended operations because of the virus, at a time when the whole industry was already ground down by years of shopper defections to online merchants.
Neiman Marcus has been trying to simultaneously spend more on luring customers while taming its debt load, with mixed success. Borrowings ballooned after its 2013 leveraged buyout to Ares Management Corp. and the Canada Pension Plan Investment Board. The company reached a deal with creditors last year that put off the due dates on some of its debt to buy time for a turnaround.
It also shuffled Mytheresa to a place in its capital structure that put the business beyond the reach of creditors, creating hard feelings with some bondholders that still linger.
The chain “has struggled for years to adapt among ongoing secular changes facing the department store sector, a circumstance that has deteriorated because of the operation disruptions from the coronavirus and recessionary conditions,” S&P analyst Mathew Christy wrote in an April 22 report.